Category Archives: Money

Federal Debt and A Bad Law (FATCA) May Collapse the Dollar

All of us have experienced the merciless effects of the “law of unintended consequences” at one time or another. We do something that we think is good or proactive, only to discover that there are negative effects produced as byproducts of our good intent. The creation of an unanticipated pejorative result from purposeful action is classified as an unintended consequence, and the government is masterful at it. Perhaps the granddaddy of them all is about to be enacted on July 1, 2014.

Growth-Of-United-States-Government-DebtIn March of 2010 the HIRE Act (Hiring Incentives to Restore Employment Act) was signed into law by the president, having been passed by the House under Speaker Pelosi, and the Senate under Harry Reid. It was designed as a bill that would provide incentives for employers to start creating jobs again. The bill’s efficacy could be debated, but one component of the law could prove debilitating to the dollar as the global reserve currency and the nation’s ability to finance our debt and deficit.

Embedded in that piece of legislation under Title V is the Foreign Account Tax Compliance Act (FATCA), which was designed to target American taxpayers with assets in foreign banks. It had nothing to do with the intent of the HIRE Act, but that seems to be the modus operandi of the federal government, to hide things in plain sight so as to not arouse suspicion. Forbes calls FATCA “the worst law Americans have never heard about.”

national-debt-per-capitaFATCA is creating a data retrieval system that some have compared with the NSA’s (National Security Administration) meta-data information dragnet. It requires all non-U.S. based financial institutions, including banks, credit unions, insurance companies, investment and pension funds, to provide data on all specified U.S. accounts to the IRS (Internal Revenue Service). From that data, the IRS will attempt to collect taxes on revenue from overseas-based accounts of U.S. citizens.

There could be as much as about $800 million a year that could be collected by the IRS from implementation of FATCA, according to the Joint Committee on Taxation. Based on the nation’s current spending level, that’s enough to run the government for about two hours.

FATCA-IRS-bullyWhile $800 million is still a large sum, IRS Commissioner John Koskinen recently informed Congress that the cost of implementation will zero out any anticipated gain to the treasury. And the IRS’s internal Taxpayer Advocate Service issued a report that came to the same conclusion, indicating, “FATCA-related costs will equal or exceed projected FATCA revenue.”

The questionable enforcement measures implemented in the Act are what could portend ominous consequences for all of us. Beginning July 1, 2014, any foreign institution, including foreign government, failing to fully cooperate in providing the requested information to the IRS, can be classified by Treasury as “recalcitrant.” Such institutions will not be paid the full interest they are due on the U.S. bonds, notes, and bills that they own. The Department of the Treasury will consequently withhold as much as 30% of interest payments to them as an “economic sanction.”

In other words, we will not pay, as we have “guaranteed” in the past, full payment of interest on our debt, at least to those classified as “recalcitrant.” Such a partial payment is classified as a “default.” In this case, it’s a willful default, since the full interest payment will be withheld in favor of a reduced payment.

swiss-fatcaEven the possibility of the U.S. intentionally defaulting on some of its debt interest payments is creating some uncertainly in foreign markets. This is alarming since according to Treasury, over $5.8 trillion of our debt is held abroad. So far only about two dozen countries have signed FATCA agreements, indicating a willingness to cooperate with the IRS. And China, the largest foreign holder of our debt, is not among them.

James George Jatras, a former U.S. diplomat and U.S. Senate staffer, said recently regarding FATCA, “In the end, no one really knows how this will work, which is part of the problem. Foreign purchases of U.S. Treasury securities and the reliability of interest payments are essential to America’s financial stability. Even a slight market change in U.S. borrowing costs could have a disastrous impact on the deficit and our economy. Why play Russian roulette with the U.S. debt absent a big, identifiable, countervailing benefit?”

The likelihood is that foreign institutions and countries will be less inclined to purchase U.S. debt if they may be denied up to 30% of the interest due them. With our massive debt of nearly $18 trillion, we have bonds and notes maturing every month. What happens if previous buyers of our debt quit buying? For one thing, the cost of interest servicing that debt will rise, and it could be significant.

weak-dollarTwo years ago, Erskine Bowles, co-chairman of the president’s bipartisan deficit-reduction commission known as “Simpson-Bowles,” called the nation’s compound interest burden “one of the biggest long-term challenges facing the United States.” He said, “We’ll be spending over $1 trillion a year on interest by 2020. That’s $1 trillion we can’t spend to educate our kids or to replace our badly worn-out infrastructure.” And that was even without factoring in a significant increase in interest rates because of a diminished appetite for U.S. debt due to FATCA.

Our economic stability, and the strength of the dollar as the global reserve currency, is directly dependent on a stable bond market for our debt instruments. With the possibility of pending diminution of appetite for that debt, our economic stability as a country is at risk. Clearly, our massive debt and this poorly conceived and implemented legislation, are posing a national security risk that could potentially affect all of us.

Associated Press award winning columnist Richard Larsen is President of Larsen Financial, a brokerage and financial planning firm in Pocatello, Idaho and is a graduate of Idaho State University with degrees in Political Science and History and coursework completed toward a Master’s in Public Administration.  He can be reached at [email protected].

 

Conservatism Contrasted with Obama’s Policy Failures

Conservatives have, from the beginning of his candidacy for the presidency seven years ago, been critical of our sitting president. It has nothing to do, contrary to some sophist’s convictions, with the color of his skin. And our criticisms are not ad hominem for they aren’t against him personally, but against his policies and what he’s doing to “fundamentally transform America.” So for political clarity, lets enumerate a few areas where conservative political policies would make such a difference to the country.

Federal Non-Defense Spending as % of GDP

Federal Non-Defense Spending as % of GDP

First, we would not have more than doubled the national debt from $7.6 trillion, when Nancy Pelosi and Harry Reid took over, to over $18 trillion now. As Hillary Clinton said a couple years ago, that’s a national security issue, since it places our entire nation at risk, economically, fiscally, monetarily, and even in terms of our national security. The deficit would not have quintupled from $263 billion when Pelosi/Reid took over, to $1.6 trillion during Obama’s first year, and remained at $1.3 trillion for the past two years. In other words, we would not be borrowing $.41 for every $1.00 that we spend! Contrary to what Pelosi did after she became Speaker, and including the first term of the Obama administration, we would have actually had a budget passed by the congress. Until the concurrent resolution was passed just last year, we had not had a budget passed by congress since 2006. They’ve been simply running up the national credit cards at unprecedented levels with absolutely no budgetary restraint.

Federal Deficit Since 2000

Federal Deficit Since 2000

After creating an all star panel to assess the budgetary and fiscal crises exacerbated by unabated spending, the president’s Simpson-Bowles Commission recommendations to put the nation on a sound fiscal footing would not have been ignored, but implemented as judiciously and expeditiously as possible. There is still no sign of leadership in resolving the unfunded liabilities, and exacerbated budgetary problems, of Social Security and Medicare. It’s as if the critical mass of those concerns will not be reached during his term in office, so it doesn’t matter, so all that’s occurred is a perpetual “kicking the can” down the road for some future leader who has some backbone and leadership abilities to address them. A 2,700 page legislative monstrosity that took over 1/5th of the national economy to put government in charge of health care would never have occurred. And we certainly wouldn’t have stolen $716 billion (now $741 billion according to the CBO) from Medicare to pay for it. Instead of piling on requirements for “qualified” health insurance policies, the over 2,200 covered requirements would have been removed so people could buy exactly the coverage they want, rather than what the government compels them to buy. And policies could be bought across state lines for increased price competition. Realizing that one of the greatest deterrents to small businesses creating new jobs is the high cost of regulation, the current $11,500 regulatory cost to small businesses per employee (per the SBA) should be reduced by getting government out of the business of micromanaging every aspect of the business environment. And certainly the regulatory burden of small business would not be exacerbated by another 30% with the additional regulatory expenses of Obamacare, FinReg, and expanded EPA regulations. Realizing that our economic model is so severely tainted by crony capitalism, the unhealthy marriage between business and government regulation and policy, it’s time to start unwinding that interconnectedness. The federal tax code for corporations needs to be rewritten, by excluding all loopholes that are favorable to select companies and industries, and create instead a fair flat tax for corporations.

Failure of Quantitative Easing

Failure of Quantitative Easing

Over the past six years, the Federal Reserve, in the name of “economic stimulus,” has taken over $4 trillion out of banks hands to purchase debt instruments, through the three iterations of Quantitative Easing. There has been negligible benefit other than giving the stock market an artificial high. It’s time to rein in the Federal Reserve, get the FOMC out of the “stimulus” business, and return them to their primary functions of controlling inflation and maximizing employment. Congress and the American people have a right to demand that the chief executive of the country be held to constitutional and legal restraints of his power. He should not act as if he is above the law by selectively picking and choosing which laws would be enforced, and declare existing laws void because the chief executive disagrees with them. And the use of the Executive Order should be used legally, based in existing federal statute, and not creating new laws and regulations with the stroke of his pen. That’s just a beginning. I could go on and on. Those differences would contribute to a more secure fiscal and economic future for the country; a stronger dollar; greater participation in the job market and lower unemployment; a more robust economy and expanding job market; lower cost health care insurance; less crony-capitalistic corruption from the relationship between government and corporate America; less meddling in the private sector; more individual freedom; and less totalitarianism in the Oval Office. Associated Press award winning columnist Richard Larsen is President of Larsen Financial, a brokerage and financial planning firm in Pocatello, Idaho and is a graduate of Idaho State University with degrees in Political Science and History and coursework completed toward a Master’s in Public Administration.  He can be reached at [email protected].

What today’s economic news tells us about the ‘recovery’

Listening to the President, his administration, some in Congress and several news reports, many would say the economy is recovering slowly but gaining traction. Seeing the economic data released today may reveal a somewhat more real reality.

The unemployment figures released this morning seem promising, but only in a vacuum. Claims dropped 24,000 to a seasonally-adjusted 297,000 for May. What the report doesn’t tell us is why fewer people filed claims. Was it because all of these folks have found gainful employment? Or are fewer people re-entering the labor market after having given up on finding a job some time ago?

Home builders are feeling less confident in a housing recovery. The latest survey of builders dropped to 45 for May and the April number has been adjusted lower.  Anything below 50 is considered “negative sentiment.”

The Philadelphia Federal Reserve Bank’s business activity index dropped from 16.6 in April to 15.4 in May. New orders also saw a decline from  14.8 to 10.5 indicating that the pace of growth is slowing.

If economists’ data isn’t enough, two of the nation’s largest retailers are reporting disappointing earnings.

Wal-Mart reported the smallest sales growth in 5 years today. The report blames the harsh winter for keeping customers out of their stores, but then goes on to forecast a second quarter that will come in below analysts’ expectations.

Kohl’s reported their first quarter results today and missed – on both sales and earnings. The retailer showed a $13 million drop from the same time last year in sales and missed analysts’ expectations by $15 million.

How Britain Achieved – And Lost – Economic Preeminence – And Lessons For The US

In the mid-19th century, and in the first few decades afterwards, Britain was an unmatched military, economic, colonial, and thus geopolitical colossus, by far the most powerful country in the world. There was no country that was even close to matching the military or economic power of Britain, which had the largest empire in the world, spanning all continents.

So vast was the empire that it was one on which the sun never set – because no matter where the sun was shining at that moment, it was shining on British colonies, dominions, and possessions. So powerful was Britain that she was able to exert influence all around the world and act as the arbiter of world affairs. Thus, the world experienced an era of Pax Britannica.

Why? Because Britain was by far the world’s most powerful country, both economically and militarily.

In the middle of the 19th century, around 1850, Britain was by far the world’s largest producer of coal, pig iron, steel, and warships, consumed the most cotton and coal, and her industrial machines were the most modern and most powerful in the world. This enabled Britain to have a Navy that was far larger than the combined navies of the US, France, Japan, and Russia. Whether the measure was total fleet tonnage or the number of any class of warships, the UK Royal Navy had far more of them than any other Navy in the world.

Britain Loses Her Economic, Military, and Geopolitical Preeminence

Fast forward half a century to 1900, and then to 1913, the eve of World War I, and we see a completely different picture. Britain had, by then, lost its first place in the world, both economically and militarily. The US, Japan, and Germany began building navies rivalling the Royal Navy. The US and Germany also overtook Britain economically by all key metrics. As a result, Britain had to assemble a coalition of countries, the Entente, and enlist the US as an Associated Power to win World War 1 – and contracted a huge debt to win that war, because Germany proved to be a very tough enemy to beat.

Even before then, before WW1, Britain had lost its economic preeminence. Consider:

  • In terms of coal production, Britain dominated the pack in 1870, producing 125 mn tons of coal vs 41 for the US and 42 for the German states (mostly Prussia). By 1900, it was producing 185 mn tons, but the US wasn’t far behind at 143 tons and Germany was at 89 tons. By 1913, the UK was producing only 292 tons, while America’s annual coal output was 517 tons and Germany’s was 277.
  • The UK producted 6.7 mn tons of pig iron in 1870, while the US produced only 1.9 mn tons. But in 1900, the US produced 9.4 tons vs 8.0 mn for Britain. In 1913, the US produced 31.5 mn tons, and Germany 19.3 mn tons, versus only 10.4 mn tons for Britain.
  • The US overtook Britain in terms of steel production even earlier, in 1886, and Germany did so in 1893.
  • In 1871, the efficiency and output of British steel mills was two times that of US steel mills, but by 1891 it was only 50% of America’s steel output.
  • In 1890, the power of steam machines in the US industry was 45% higher than those in the British industry.
  • In 1870, Britain’s share of the global industrial production was 32%; by 1913, it was only 14%. America’s share during the same timeframe rose from 23% to 35.8%, and Germany also overtook Britain, from 13.2% in 1870 to 15.7% in 1913. The US and Germany were simply producing – and earning – more. Period.

Thus, the country that was essentially the world’s biggest coal mine, steel mill, and factory in 1850 was, by 1913, only in third place – not even in the second place – by the key economic metrics of the time! In terms of industrial production, it was lagging behind Germany and far behind the US.

The military consequences of Britain’s economic decline followed, though not immediately or quickly. But inevitably, eventually, they did follow – and they weren’t pretty.

In 1883, Britain had 38 pre-dreadnought battleships, while the US and Japan had zero, Russia had but three, Italy had only 7, Germany 11, and France 19. This means Britain had more battleships – the key weapons of the day – than the next three countries combined!

In 1897, the gap was narrower, though Britain still led the pack: it had 62 battleships in service or construction, but France had 36, Russia had 18, Germany had 12, Italy also 12, the US had 11, and Japan had seven. The next three countries (France, Russia, and Germany or Italy) had more of these warships than the UK.

Matters grew even worse for Britain when she launched HMS Dreadnought, the most powerful battleship in the world at the time, in 1905. The British thought these warships would guarantee them naval supremacy. But they were wrong. Just three years later, the Germans had only three dreadnoughts fewer (9) than the British (12). And other nations were building such warships as well.

Moreover, at Tsushima in 1905, the Japanese Navy showed that a heavily outnumbered fleet can still trash a larger one. Despite being outnumbered two-to-one and not having any significant mineral resources, the Japanese still trounced the Russians in what was one of the biggest military victories in human history, a naval version of the Battle of the Cannae. The Japanese barely lost 3 torpedo boats and 117 men, while the Russians lost their ENTIRE fleet in the Far East – 21 warships – and over 5,100 KIA.

This showed that a smaller, heavily outnumbered fleet, could, in an individual battle, beat a twice larger navy if better led, manned, and equipped.

So Britain’s unquestionable naval supremacy was a thing of the past – ESPECIALLY since the Germans had only slightly fewer dreadnoughts than the British.

As a result, Britain needed to appease the US in the Western Hemisphere, court Japan to make it Britain’s ally in the Far East, and enlist former rivals France and Russia – with whom the UK nearly went to war just years before – as allies to counter growing German power.

By 1914, one hundred years ago, the three countries went to war together – and still couldn’t beat Germany, by now Europe’s preeminent economic and military power. Russia was driven out of the war, and the US had to be enlisted to help win the war. Britain itself was too weak to defeat Germany, even in an alliance with France and (until 1917) Russia.

In the course of World War I, Britain contracted such a huge war debt that it had difficulties paying it down later, and from the world’s banker became America’s debtor.

How Did It Come To Pass?

How did it happen? How did Britain lose its economic and military preeminence?

To some degree, this was because of the obsolete structure, growing technological obsolence, and the conservative mindsets of the leaders of, British industry. And partly it was due to the reunification of Germany, which produced a formidable rival for Britain.

But these obstacles could have easily been overcome. None of these were fatal illnesses.

The REAL cause of Britain’s economic and military decline was its embrace of the poisonous, suicidal, pernicious ideology of “free trade” and the consequent policies.

Until the mid-19th century, Britain – like every country that ever rose to economic preeminence – protected and nurtured its industry with protectionist laws and customs duties.

But beginning in the 1840s, the Parliament began repealing them. In 1846, it repealed tariffs on imported grain (the Corn Laws); in 1850, it got rid of the Navigation Act; and in 1860, it scrapped protective tariffs completely. That’s it – there were no more customs or tariffs on imports to Britain. Anyone was free to export to Britain free of any tariffs.

British industry was thus left without ANY protection against foreign competitors – because no other country had done such a thing. All other countries continued, to various degrees, to protect and nurture their own industry with tariffs as well as non-tariff barriers.

This was especially true of… the US and Germany, the two countries that overtook Britain and took away her crown. The US had high protective tariffs since the 1860s, and Germany since the times of the Customs Union, established in 1834.

Thus, Britain effectively committed unilateral disarmament in the trade arena, which is just as suicidal as disarmament in the military arena.

The problem was simple: US and German companies were protected by these countries’ tariffs and non-tariff barriers to imports, while British companies were left without ANY protection against foreign competitors.

Thus, the US and Germany began flooding the world – including Britain herself – with their products – and achieved greater shares of the world’s industrial production and trade than Britain.

This is not surprising to anyone knowledgeable about economics. For protectionism is the policy of RISING economic powers, while free trade is the policy of DECLINING ones.

Protectionism is the road to wealth, prosperity, and national power, while free trade is the road to deindustrialization, unemployment, and economic stagnation.

Contrary to what free trade ideologues may tell you, NO nation in history has ever risen to economic preeminence by indulging in free trade.

EVERY country that ever became an economic powerhouse did so by protecting, nurturing, and supporting its industry against foreign competition – England under the Acts of Navigation, Britain until 1860, France under Colbert and Napoleon, Germany under the Customs Union and Bismarck, the US from the 1860s to 1960s, postwar Japan, China today .

America Is Losing Her Preeminence – And Fast

In today’s world, America is losing her economic and military preeminence even faster than Britain did in the late 19th century – and America’s edge over the world was never as great as Britain, except the late 1940s and early 1950s.

Just recently, the World Bank predicted that China would overtake the US in GDP by the end of this year. In 2012, the IMF predicted China would leapfrog the US by 2016. The Economist predicts it will happen by 2019.

China is already the world’s top exporter, having surpassed Germany a few years ago, which itself surpassed the US in the early 2000s. China is also the world’s top maker of many goods of all sorts, and also has trade surpluses with many other countries in the world. For example, its trade surplus with France runs at over 30 bn euros per year!

In 2013, the US trade deficit with China – thanks to free traders’ suicidal policies – was the largest annual trade deficit EVER recorded between any two nations, at $315 bn.

The US is also running trade deficits with almost every other country in the world: with crisis-stricken Italy, at $20 bn per year; with Ireland, at $25 bn per year; with Germany, $60 bn per year; with Canada, $32 bn per annum; with Mexico, $61 bn; with Japan, $88 bn per year; with South Korea, $16.6 bn per year.

This is because the US has almost completely disarmed itself unilaterally in terms of trade. Foreign countries exporting goods to the US pay little in the way of tariffs, while US companies trying to export to foreign countries face steep tariffs – and heavily-subsidized competitors – abroad.

Also, many foreign countries, including China and Japan, manipulate their currencies by devaluing them, thus making their exports cheaper abroad (e.g. in the US). Yet, Japan plans to devalue its currency still further, making its exports still cheaper.

Yet, American free trade ideologues oppose taking ANY action against such blatant cheating and such uneven playing field, and demand that the last vestiges of protection for the US industry be scrapped: Buy American Laws, the Export-Import Bank, and the few tariffs that remain.

When, in 2012, GOP presidential candidate Mitt Romney pledged to designate China as a currency manipulator, free trade ideologues from the left and the right accused him of wanting to start a trade war… not realizing China has ALREADY been waging a trade war on the US for decades.

The Military Consequences

And just like Britain’s loss of economic preeminence was followed by her loss of military superiority, so is the US losing its last vestiges of military superiority over China (and Russia) as a consequence of committing economic suicide.

The US no longer has a monopoly on any military technology. Its military has always been smaller than China’s – the latter is the world’s most populous country after all – but China’s military is now also much more modern than a decade or two ago.

The PLAN, the Chinese Navy, is already larger than the USN and has more submarines. Their surface combatants are as good as American ones, and their diesel-electric submarines are far quieter than anything the USN has. Their anti-ship missiles are much faster and longer-ranged than America’s sole anti-ship missile, the Harpoon. China also has 100,000 naval mines, against which the USN is nearly helpless as it has only 13 minesweepers – none of them in the regular Navy.

The PLA Air Force has hundreds of modern Generation 4+ fighters, including Flankers and J-10s, plus 389 old but highly agile and fast J-7 fighters. And what does the USAF have? 180 top-notch Raptors and around 300 F-15C/Ds, I’ll give you that much; but its F-16s would not stand a chance against Chinese fighters other than the old J-7. And the F-35, the most expensive, heaviest, and most sluggish “fighter” in the world, will be such a heavy pig it will be inferior to EVERY fighter on the planet.

The PLAAF is now developing TWO stealthy fighters – the J-20 and the J-31 – which, when inducted into service, will make every other fighter in the world, except the F-22 and the Russian PAKFA, obsolete, useless, impotent, and irrelevant.

The PLA’s Second Artillery Corps now has 66-75 ICBMs capable of reaching the US, plus 140 medium- and over 1,600 short-range ballistic missiles and hundreds of ground-launched cruise missiles – weapons which the US does not have and is prohibited from developing.

PLA_ballistic_missiles_range-590x362

The PLA also has a lopsided edge over the US in cyber and space warfare. Its hackers routinely penetrate US government networks with impunity, and it has an arsenal of anti-satellite weapons capable of shooting down all US satellites anytime.

Similarly, China’s anti-ship missiles are so fast, so long-ranged, so numerous, and so cheap that China could easily saturate USN warships with them – and USN defenses are incapable of intercepting supersonic, sea-skimming cruise missiles.

China also has many, many more nuclear weapons than the US DOD and American arms control afficionados are prepared to acknowledge: at least 1,600 (according to Russian General Viktor Yesin), and up to 3,000 (according to Dr Philip Karber, the top nuclear strategist in the Reagan Administration).

And, of course, China’s military has not been infected with political correctness and the open celebration of homosexuality and feminism – unlike the US military.

Let’s face the facts: America’s economic and military dominance is already largely a thing of the past. The US retains an advantage only in a few categories and on a few metrics – and China is now working hard on closing those few gaps as well.

China is now doing to the US what the US itself and Germany did to Britain in the late 19th and early 20th century: overtaking it economically and militarily.

The difference is that, unlike Britain, the US has no friendly power to whom hand over the torch.

So either the US will break free of its “free trade”, “noninterventionism”, “let’s mind our own business”, and “let’s cut the military” fantasies, or it will completely lose its preeminent status to China, with all the consequences stemming from that.

Whose party platform is it?

Today is May 1st, also called the “International Workers’ Day”, a communist feast par excellence, celebrated by communists and socialists, indeed by Leftists of all stripes, around the world. So I would like to ask you, Dear Readers, if you can recognize which socialist party had the following platform? Whose party platform is it? (No looking it up in Google!)

We demand that the state be charged first with providing the opportunity for a livelihood and way of life for the citizens. (…)

All citizens must have equal rights and obligations.

The first obligation of every citizen must be to work both spiritually and physically. The activity of individuals is not to counteract the interests of the universality, but must have its result within the framework of the whole for the benefit of all.

In consideration of the monstrous sacrifice in property and blood that each war demands of the people, personal enrichment through a war must be designated as a crime against the people. Therefore we demand the total confiscation of all war profits.

We demand the nationalisation of all (previous) associated industries.

We demand a division of profits of all heavy industries.

We demand an expansion on a large scale of old age welfare.

We demand a land reform suitable to our needs, provision of a law for the free expropriation of land for the purposes of public utility, abolition of taxes on landand prevention of all speculation in land.

We demand struggle without consideration against those whose activity is injurious to the general interest. (…)

The state is to be responsible for a fundamental reconstruction of our whole national education program (…)The State is to care for the elevating national health by protecting the mother and child, by outlawing child-labor, by the encouragement of physical fitness, by means of the legal establishment of a gymnastic and sport obligation, by the utmost support of all organizations concerned with the physical instruction of the young.”

Don’t recognize whose platform is it?

The Communist Party of the Soviet Union? Of China? Of Italy? Of the USA? The French Communist Party? The French Socialist Party? The UK Labour Party? The Argentine Justicialist Party?

Nope, nope, and nope. This is the platform of the National Socialist German Workers’ Party (NSDAP), AKA the German Nazi Party, planks no. 7, 9, 10, 11, 12, 13, 14, 15, 17, 18, 20, and 21.

You see, despite all the attempts by the global Left to tar the Right with responsibility for and ideological kinship with the Nazis, for all their attempts to stick the Nazi tag to the Right, for all their false claims that the Nazis were “far-right”, the Nazi Party was thoroughly LEFTIST through and through.

Nazism is a mere shorthand for “national socialism”, and that brand of socialism, while being nationalistic, was still SOCIALIST and thoroughly leftist. The Nazis advocated, and implemented, nationalisation, land reform, outlawing child labor, and the division of corporate profits.

Not only that, but their leader, Adolf Hitler, publicly said that he and other Nazis were SOCIALISTS:

“We are socialists, we are enemies of today’s capitalistic economic system for the exploitation of the economically weak, with its unfair salaries, with its unseemly evaluation of a human being according to wealth and property instead of responsibility and performance, and we are determined to destroy this system under all conditions”

– Adolf Hitler, Hitler’s speech on May 1, 1927. Cited in: Toland, John (1992). Adolf Hitler. Anchor Books. pp. 224–225. ISBN 0385037244.

No matter how hard leftists around the world deny it, national socialism was a thoroughly LEFTIST ideology, and the Nazis were their ideological, national socialist cousins. The only difference between them and communists is that communists are “international socialists.”

Stop Maligning the Export-Import Bank. America Needs It.

Recently, pseudoconservative Sen. Mike Lee (R-UT) and a few of his Congressional chums, along with the neoconservative Heritage Foundation, have resumed their utterly misguided and dishonest propaganda campaign against the Export-Import Bank, maligning it with a litany of lies. Furthermore, because the Bank’s 2-year operating authorization is set to expire soon, Lee and his fellow pseudoconservative Congressional pals seek to kill the Bank, as does the Heritage Foundation and its lobbying outfit, Heritage Action.

They falsely claim that the Bank hands money out to “politically connected” businesses, skews free markets, and exposes taxpayers to unnecessary loan risk. They falsely claim that over 80% of its loans go to huge corporations like Boeing and General Electric. They malign the Bank as a “crony capitalist” agency.

All of their claims are utterly false, however. In this article, I will correct the record.

The Facts About The Export-Import Bank

Here are THE FACTS about the Export-Import Bank:

  • It does NOT receive any funding from the taxpayers and does not cost them a single cent. In fact, thanks to its interest rates, it returns a profit to taxpayers every year – to the tune of $1 bn last year.
  • It does NOT provide any subsidies to anyone. It only provides LOANS to businesses – which have to be (and are always) fully paid back with interest.
  • Over 90% of its loans are provided to SMALL BUSINESSES, NOT big companies like Boeing and GE.
  • It is NOT a crony capitalist agency, because crony capitalism is the act of providing handouts to those individuals or businesses who are politically connected or sympathetic to a sitting government. The Ex-Im bank provides loans without regard to businesses’ and their owners’ political sympathies or contributions.
  • It is absolutely necessary to help American companies level the playing field on the global market, which is heavily skewed towards foreign competitors who are lavishly subsidized (not merely provided with loans, but outright subsidized) by their national governments. Foreign countries always have (and will, for the foreseeable future) lavishly support their manufacturers, especially in key industry sectors. The only choice for the US is to either do the same or stop aiding its exporters and thus lose its industry entirely over time.
  • Big companies, such as Boeing and General Electric, receive only a small portion of the Export-Import Bank’s loans.
  • Ex-Im has NEVER loaned any money to Solyndra, despite Heritage Action’s utterly false claims.

Ignoring these facts, Sen. Mike Lee nonetheless presses for the Export-Import Bank’s deauthorization and has recently declared in the National Review that “whether the Export-Import Bank provides loans to respected, successful companies like Boeing or failed companies like Solyndra is irrelevant.”

Excuse me? Whom it provides loans to is irrelevant?

Are you on drugs, Sen. Lee?

It matters a lot!

Whom the Bank loans money to matters, because it determines whether the loan is likely to be paid back with interest or not. In the last 27 years, it has always been in all cases.

Sen. Lee protests that it’s irrelevant because loaning money to private companies – even to American exporters – supposedly skews the free market and violates conservative principles.

But as I will demonstrate, this is utter gibberish.

Economic Nationalism Leads To Prosperity, Free Trade To Economic Decline

Supporting American exporters – especially with loans rather than subsidies – does NOT skew free markets and is NOT a violation of conservative principles.

Globally, there are NO free markets – the global marketplace is already heavily skewed… in favor of America’s and American companies’ competitors, that is.

Virtually all major traders around the world, except the US, protect their industry with subsidies, loans, protective tariffs, and in many cases (e.g. China), currency manipulation.

China, India, Japan, Russia, Germany, France, Mexico, Canada – all of them, and many other countries around the world, protect, nurture, and generously aid their industries, especially exporting companies.

The US and the UK are the only major traders in the world who don’t do so and instead indulge in “free trade” fantasies.

It is therefore no surprise that the US has huge trade deficits with almost every other country around the world: with Italy and Ireland, $20 bn annually each; with Germany, over $30 bn annually; with Mexico, over $60 bn per year; with South Korea, $25 bn per year (it has tripled since the ratification of the KORUS free trade agreement).

America’s trade deficit with Japan is the largest America has ever had with Nippon.

America’s trade deficit with China last year was the largest ever recorded in human history between any two countries, at over $300 bn! Not just the largest between the US and China, but the largest trade deficit ever recorded between any two countries!

Such are the disastrous results of suicidal “free trade” policies that the GOP and the Heritage Foundation have promoted for decades.

These folks, including Sen. Mike Lee, are obviously ignorant of the fact that EVERY country which ever became an economic power did so by protecting and supporting its industrial base, especially exporters: England under the Acts of Navigation, Britain until the mid-19th century, France under Jean-Baptiste Colbert and Napoleon, Prussia under the Customs Union, Germany since the 19th century, Japan since the Meiji era, America from the 1790s to the 1960s, China today.

NO country has ever become an economic power, or generated prosperity, by indulging in free trade fantasies. Free trade is only for dupes and idiots.

America’s own history is instructive here. The US used to be, economically, a totally independent country and THE world’s factory of all sorts of goods. Today, it has been largely deindustrialized and is dependent on China for the necessities of life – thanks to suicidal “free trade” policies.

From the Founding Fathers’ era until the 1960s, the US followed the Founding Fathers’ economic preceipts: Manufacturing, not finance or services, is the nation’s economic muscle. Trade surpluses are preferrable to trade deficits. Exports are preferrable to imports. To protect the economy and Americans’ jobs, the US industrial base must be protected by any means necessary. “Made in the USA” should always be preferred.

It is no coincidence that all four Presidents who made it to Mount Rushmore were protectionists.

“Thank God I’m not a free trader”, President Teddy Roosevelt remarked once.

But starting in the 1960s, America began to unilaterally open up its huge market to foreign companies without obtaining reciprocation from foreign countries.

Thus became the deindustrialization, and the unilateral economic disarmament, of America.

And even though it was a Democratic-controlled Congress who passed, and a Democrat President (JFK) who signed, the Trade Promotion Act, it is Republicans who have led the way in this unilateral economic disarmament.

And, predictably, it has proved just as disastrous for America’s well-being as the Democrats’ campaign to unilaterally disarm America militarily.

Indeed, America now has two pro-unilateral-disarmament parties: the Democratic and Republican Parties.

The Democrats, led by Harry Reid and Edward Markey, want to unilaterally disarm America militarily. Republicans, led by Sen. Mike Lee, want to unilaterally disarm America economically.

America has now fewer than 25% of the nuclear arsenal she had in 1991, at the Cold War’s end, and one of its last protections for the US industry is the Export-Import Bank. If that is terminated, the US industrial base is likely to go the way American civilian shipbuilders went after the Reagan Administration cut off aid to them: out of business.

 

Rand Paul is the one distorting Reagan’s foreign policy

ReaganPeaceQuote

 

Ronald Reagan was such a successful President – especially in the foreign policy realm – that virtually all Republicans today want to project themselves as the next Reagan and claim that their foreign policy is the same as Reagan’s in order to woo national security oriented voters.

One such politician is Sen. Rand Paul (R-KY). Because his principal rival for the 2016 Republican nomination, Sen. Ted Cruz (R-TX), has distinguished himself from Paul by adopting Reagan’s foreign policy principles while exposing Paul as the neo-isolationist that he is, the Kentucky Senator is desperate to defend himself.

Therefore, he has recently launched an attack on unnamed “Republicans” (presumably Cruz) on the Breitbart website, falsely accusing them of “warping” Reagan’s foreign policy.

But in fact, it is Rand Paul, NOT Ted Cruz or other Republicans, who is warping and distorting the Gipper’s foreign policy. Let me demonstrate how.

Rand Advocates Deep Defense Cuts

Rand advocates deep, crippling cuts in America’s defenses, including and beyond sequestration; withdrawing US troops from strategically important bases around the world which are needed for power projection; isolationism masquerading as noninterventionism; and opposes even the most modest sanctions on Iran, claiming they would lead to war (a false claim that the anti-defense Left, including the Ploughshares Fund, also makes). Indeed, Rand has said that “not only should the sequester be maintained”, but that government spending, including defense spending, should be cut even further – as if the sequester’s and pre-sequester Obama defense cuts were not deep enough.

As a reminder, in his first two years, Obama killed over 50 crucial weapon programs, including the F-22 Raptor fighter (the only aircraft capable of defeating the newest Russian and Chinese fighters), the Zumwalt class destroyer, the Kinetic Energy Interceptor, the Multiple Kill Vehicle for kinetic missile defense interceptors, and much more. In 2011, Obama cut another $178 bn from the defense budget under the guise of efficiencies. And in August 2011, Obama demanded and obtained another $1 trillion in defense cuts over the FY2012-FY2012 decade, including a $550 bn sequester that will take defense spending to $493 bn (less than 3% of America’s GDP) next year and keep in there until the mid-2020s!

Yet, Rand Paul thinks these defense cuts are not sufficient and demands even deeper, more crippling, defense cuts. This completely belies his claim that

“I believe, as he did, that our National Defense should be second to none, that defense of the country is the primary Constitutional role of the Federal Government.”

If the cuts required by the sequester (let alone the deeper cuts Rand demands) are implemented, the US military will be gutted. It will be a paper tiger, not a military force “second to none.”

Reagan would NEVER advocate such idiotic policies, and indeed throughout his entire presidency implemented the very OPPOSITE of the policies Rand advocates. OTOH, Ted Cruz – unlike Rand Paul – does support a Reaganite foreign policy: rebuilding America’s defenses, standing up to dictators like Putin where it matters, but avoiding being drawn into irrelevant or murky jihadist viper pits like Syria.

But it gets even worse. In the Breitbart article cited above, Rand not only distorts the Gipper’s foreign policy, he shows he completely doesn’t understand what that policy was and how it worked, and demonstrates – there, as well as in his recent (Feb. 25th) Washington Post op-ed – that he does NOT support a Reaganite “Peace Through Strength” foreign policy.

He claims that:

“Reagan also believed in diplomacy and demonstrated a reasoned approach to our nuclear negotiations with the Soviets. Reagan’s shrewd diplomacy would eventually lessen the nuclear arsenals of both countries.”

Leaving aside the undisputable fact that cutting America’s nuclear deterrent has proven to be a foolish mistake, it was Reagan’s toughness, not diplomacy, that won the Cold War. In fact, it was his toughness that brought the Soviet Union back to the arms reduction barganining table in the first place.

The Soviets returned to the negotiating table because they knew the US could keep up the arms race for long, while their own economy was flagging (and in 1991, it collapsed, as did the USSR itself) and couldn’t really sustain the arms race any longer, especially with the costs of the Afghan war, the Chernobyl disaster, and the late 1980s’ oil glut added. (Reagan convinced Saudi Arabia to dramatically increase its oil output to cut global oil prices and thus undermine Moscow’s oil-dependent economy).

I’ll repeat it again: it was Reagan’s TOUGHNESS, his harsh policies towards the USSR, that brought the Soviets back to the bargaining table and eventually won the Cold War. Not diplomacy, not detente, not nice words, not his friendship with Gorbachev.

Reagan never sheathed the sword – the sword was always hanging over the Soviets’ heads. And that’s PRECISELY why Gorbachev agreed to make concessions.

Rand further claims that:

“Many forget today that Reagan’s decision to meet with Mikhail Gorbachev was harshly criticized by the Republican hawks of his time, some of whom would even call Reagan an appeaser.”

But, as demonstrated above, it was Reagan’s TOUGH POLICIES, not diplomacy or nicety, that brought the Soviets back to the bargaining table. And Gorbachev initially wasn’t in a mood to make concessions. It was not until he understood the US was in a far stronger negotiating position, and when Reagan revealed the documents Col. Ryszard Kuklinski (a Warsaw Pact defector) handed over to the CIA, that Gorbachev began to make concessions.

(At the first Reagan-Gorbachev meeting, in 1985, the Soviet leader was initially as stubborn as his predecessors, not willing to make policy concessions. Then, Reagan’s Defense Secretary, Cap Weinberger, took his ace out of his sleeve: he gave the maps [stolen by Colonel Kuklinski] of secret Soviet bunkers, built for nuclear war, to Reagan, who gave them to Gorbachev, who in turn gave them to Marshal Sergei Akhromeyev, the Soviet Chief of the General Staff, who accompanied Gorby. Akhromeyev was very scared upon seeing the documents, and explained their importance to the civilian Gorbachev. From then on, the Soviets were more willing to make concessions.)

Rand also believes firmly in a soft, appeasement-like policy towards Russia – ignoring the fact that it was such policy that led to the current  Crimean crisis in the first place. He falsely claims in his WaPo op-ed that America’s relationship with Russia should be “respectful” and that:

“There is a time for diplomacy and the strategic use of soft power, such as now with Russia. Diplomacy requires resolve but also thoughtfulness and intelligence.”

No. Diplomacy has had its time – and has dismally failed, as usual. Now is the time for FIRMNESS and MANLINESS. Now is the time to impose the harshest sanctions on Russia that are possible and to dramatically increase oil and gas production in the US (ANWR, NPRA, OCS, shale formations, authorizing the Keystone Pipeline) and to export these fuels to Europe to dramatically reduce its dependence on Russia for hydrocarbons. This would strike Russia where it would really hurt Moscow – and accomplish America’s goals without a single soldier and without firing a shot.

As for a “respectful” relationship with Russia – tell that to Vladimir Putin. Lecture him about “respectful” relationships, Mr Paul, not your fellow Republicans. Putin’s Russia has, in recent years:

  1. Invaded two sovereign countries on false pretexts, and in reality because they started aligning themselves with the West.
  2. Threatened a nuclear attack on the US or its allies at least 15 times.
  3. Repeatedly flown nuclear-armed bombers into US and allied airspace (and even into the airspace of neutral Sweden) on many occassions, even once on July 4th,
  4. Provided diplomatic protection to Iran, North Korea, and Syria, nuclear fuel and reactors to Iran, weapons to Iran and Syria, and sold tons of advanced weapons to China – weapons which will be used to kill American troops.
  5. Murdered journalists and other dissidents (e.g. Anna Politkovskaya, Alexander Litvinenko), and jailed many others, opposing the Putin regime.
  6. Conducted a huge military buildup that continues to this day and is slated to continue for long but which long ago has exceeded Russia’s legitimate defense needs.
  7. Repeatedly violated the INF treaty by testing and deploying missiles banned by the treaty.

And the US is supposed to have a “respectful” relationship with such a hostile regime, Senator Paul? Are you on drugs? Who is your foreign policy advisor, Pat Buchanan?

In short, Rand has shown, once again, that he is NO Reaganite, that he is virtually indistinguishable from his father on policy matters, and that he clearly does not believe in a “peace through strength” policy. Furthermore, he’s distorting the Gipper’s foreign policy record. Conservatives must not allow him to fool them; he would continue and even double on Obama’s failed twin policies of unilateral disarmament and appeasement of America’s adversaries. Just like Obama, Paul advocates appeasement towards the world’s most dangerous regimes, from Russia, to Iran, to Syria. No real conservative would ever vote for him.

The Good and Bad News About The FY2015 Defense Budget

ReaganPeaceQuote

This week, the DOD formally submitted to Congress its proposal of the FY2015 defense budget. The base defense budget would amount to $496 bn, and there would be a roughly $80 bn war supplemental for the final year of the Afghan war, thus bringing the total to around $580 bn, i.e. less than 4% of America’s GDP. In a few years, the war supplementals will be gone, and the base defense budget will shrink further to $493 bn, i.e. below 3% of GDP – the lowest level since before Pearl Harbor.

Already the US spends the smallest amount of money (as a share of its economy) on defense since FY1948, excluding the Clinton years when defense spending plummeted to 3.0% of GDP. Barack Obama’s budget plans would take defense spending even lower, to below 3% of GDP.

But Obama isn’t just content with cutting America’s defense spending; he’s cutting the military’s muscle as well:

  • The Navy will have to mothball half of its entire cruiser fleet – 11 vessels, several of them capable of ballistic missile defense. That’s even more than the Navy proposed to lay up previously (7). These vessels will not return to service until there is money to modernize them. The construction of new ships will also see significant cuts.
  • The Navy must also significantly cut the procurement of its crucial P-8 Poseidon and E-2D Hawkeye aircraft, the former needed to protect the US Navy against hostile submarines (esp. those of China and Iran), and the latter to provide airborne early warning, especially to the Navy’s Carrier Air Wings.
  • The Air Force will have to shed its entire fleet of over 300 A-10 Warthog aircraft. With decent armor, air-to-ground missiles, and a hefty 30mm gun spitting thousands of rounds per minute, that aircraft is ideal for close air support, which troops on the ground have always needed and appreciated. No other aircraft can provide that capability. B-52s, B-1s, F-15Es, F-16s, and F-35s are too vulnerable to damage – even to small arms fire – and too fast to ever be effective in that role. Don’t take my word for it. The father of the A-10, Pierre Sprey, who also contributed to designing the F-16, has openly said that, as much as he’s proud of the work he did on the F-16, he would NEVER claim it is useful for close air support.
  • The Air Force will also have to retire its entire fleet of U-2 spy planes, which, despite being older, can fly higher, have far more powerful aperture and more diverse sensors, and thus much better intel gathering capability, than the drones supposed to replace them (Global Hawks). It will also lose more F-15 air superiority fighters.
  • The Army will have to cancel its Ground Combat Vehicle program (intended to replace the seriously-deficient Bradley infantry fighting vehicle), and the Marines will lose the badly-needed Amphibious Combat Vehicle program, needed to replace the USMC’s Vietnam-War-era amphibious tractors.

The proposed FY2015 isn’t all bad, however:

  • It protects investment in the badly needed Long Range Strike Bomber and KC-46 Pegasus tanker, both of which are crucial to preserving the military’s ability to operate and fight globally.
  • It provides funding to buy more JASSM-ER standoff cruise missiles, which have a range of around 1,000 kilometers and can be launched by any US combat aircraft.
  • It calls for major reforms to the military’s personnel’s pay, pensions, healthcare, and benefits programs, whose costs have gone out of control, and for closure of unneeded bases.
  • It provides funding to harden some of the military’s Pacific bases; to buy more missile interceptors; and to develop a new missile defense kill vehicle and better target discrimination capabilities.

This still does not, however, outweigh the fact that the budget will, overall, weaken America’s defense, which is precisely what Barack Obama wants.

And let’s also recount what isn’t in the budget, but should be:

  • No restart of F-22 Raptor fighter production (killed by Obama in 2009), even though Russia and China have flight-tested, and are developing, a combined of THREE fifth-generation stealthy fighters that will be superior to EVERY fighter on the planet, except the F-22, when deployed later this decade.
  • No major upgrades to the F-15 fleet. Indeed, that fleet, already cut significantly by Obama, will be cut even further!
  • No major upgrades to the F-16 fleet, nor any sale of any F-16s to Taiwan.
  • No restart of the cancelled long-range air to air missile, which will leave US fighters outgunned vis-a-vis aircraft armed with the K-172 Novator.
  • No new AWACS program to replace the USAF’s old E-3 Sentry AWACS aircraft.
  • No funding for any new nuclear weapons – because it doesn’t fit Obama’s fantasy of disarming the US unilaterally.
  • No significant cuts to the DOD’s bloated bureaucracy and army of contractors.
  • No funding for an East Coast missile defense site.
  • No significant funding for alternative airbases in the Pacific or for hardening America’s existing bases in the Western Pacific.
  • No funding for a new ICBM, badly needed to replace the old Minuteman III, first deployed in 1976.

In short, as many conservatives have already stated, Obama’s proposed FY2015 budget would, if enacted, be another step on the way to disarming the US unilaterally, a policy I have warned against my entire life.

What Western powers should do in response to Russia’s aggression

 

ReaganPeaceQuoteThe Russian aggression against Ukraine, initiated by President Vladimir Putin, has surprised many but not me, and should have surprised no one.

It is simply an inevitable consequence of the West, and especially America’s, shameless appeasement policy towards Russia combined with a long-running policy of unilateral disarmament (while Russia, under Vladimir Putin, has been arming to the teeth).

For many years, and especially the last five, Western nations have been dramatically cutting their militaries, defense budgets, weapon programs, and ambitions, while Russia has been dramatically expanding its own.

And for the last five years running, this writer has been sounding the alarm about these suicidal policies, warning that they would only lead to Russian intimidation, coercion, excesses, muscle-flexing, and eventually, aggression.

This writer most notably sounded the alarm in May 2009, writing that:

“Unless European states and America suddenly adopt a hawkish foreign policy and strengthen their militaries, Europe will become a mere province of the Russian empire.”

And as usual, this writer was right all along.

Meanwhile, all those who falsely claimed that “the Cold War was over”, “Russia is our friend/partner, not our enemy”, “you are a Cold War dinosaur”, “you need to shed this Cold War mentality”, and “the 1980s are asking to have their policy back” were dead wrong.

All those who claimed Russia was a partner and not a foe, that it should be appeased and accomodated, that Obama’s “reset” policy was right, that the US could afford to cut its nuclear arsenal further – from Colin Powell, Condoleezza Rice, and the Cato Institute, to the CNAS, Michele Flournoy, Michael McFaul, Barack Obama, Hillary Clinton, Henry Kissinger, and Pat Buchanan – were DEAD WRONG ALL ALONG.

These people should now publicly admit being wrong and shut their ignorant mouths up. But we should be under no illusions that they will.

Now Ukraine, a strategically important country and a weak neighbor of Russia, has been invaded by that country under the utterly false pretext of protecting Russian citizens and ethnic Russians in the Crimea – who were not threatened by Kiev in any way – just like Hitler annexed the Sudetenland in 1938, ostensibly to protect the Sudetenland Germans from the Czechoslovakian government.

In any case, what can and should Western powers do to stop Putin from going any further?

The first and most important thing is to immediately and permanently STOP listening to the advice from the Powell-Kissinger-Flournoy-Clinton school of foreign policy, which has once again (but not for the first time) been proven DEAD WRONG.

This means no more cuts in the West’s nuclear or conventional arsenals, no more “arms control” treaties, no more accommodating of the Russians’ demands. By committing such a blatant act of aggression, they’ve forfeited the right to be heard on any issue and to make any wishes or demands.

But the West must do much more to convince Vladimir Putin that it’s serious. Mere promises of toughness, verbal condemnations, and “dialogue” won’t stop him from committing further aggression.

Therefore, the US, Canada, and European countries should, until such time as the Putin regime collapses:

1) Immediately institute a TOTAL embargo on ALL Russian products except raw minerals.

2) Hasten the deployment of all stages of the European Phased Adaptive Approach to missile defense in Europe, and build an East Coast missile defense site.

3) Immediately withdraw from the Comprehensive Test Ban Treaty, the Partial Test Ban Treaty, the New START, and the CFE Treaty.

4) Ban the Russian national air carrier, Aeroflot, from flying into US, Canadian, or EU airspace.

5) Warn Russia that any of its military aircraft that venture into US, Canadian, or EU airspace will be shot down without warning.

6) Expel Russian ambassadors from Western countries.

7) Boycott the upcoming G8 summit and Paralympic Games in Sochi.

8) Reverse all defense (budget, programmatic, force structure) cuts undertaken in the last 12 years and start building Western militaries up. In particular, the US should reverse all the cuts in its nuclear arsenal and fully modernize it; revive the MEADS, Airborne Laser, Kinetic Energy Interceptor, and Multiple Kill Vehicle programs; cancel the F-35 program and resume F-22 Raptor fighter production; develop the Reliable Replacement Warhead and the Robust Nuclear Earth Penetrator; increase its inventory of MOP bombs; reintroduce S-3 Vikings into service; improve its Navy’s ASW equipment and skills; build a Conventional Prompt Global Strike system; develop ASAT weapons; order more THAAD brigades; speed up naval railgun and laser development and deployment; and make more Aegis-class warships BMD-capable.

9) Lastly, and most importantly, Western countries should strike Russia where it is weakest: its economy. Specifically, Western countries, led by the US, should:

a) Impose total economic sanctions, including a total embargo and asset freezes, on Russia; and

b) Start freeing itself from Russia’s oil and gas domination by opening the Outer Continental Shelf, the ANWR, the National Petroleum Reserve-Alaska, all shale oil and gas deposits throughout the West, and the reserves in the Everglades; liquifying coal; using methane in lieu of natural gas; cancelling the South Stream pipeline; authorizing the Keystone Pipeline; and building the Nabucco Pipeline instead (and as quickly as possible). In addition, the US, which is already a net oil and gas exporter, should immediately start exporting these fuels to Europe to help it wean itself off Russian hydrocarbons.

The Russian economy is terribly dependent on raw minerals exports; 66% of the Kremlin’s revenue comes from these exports, while manufactured goods exports account for only about 10%. Moreover, Putin’s invasion of Ukraine has already caused significant unrest at the Moscow stock exchange, whose main index has seen a 10% fall (and a 20% decline in the Russian currency’s value to the dollar) just today (as of 8:24AM ET, 18:24 Moscow time).

Moreover, Putin’s totally incompetent interference in the affairs of Gazprom, the Russian gas producing and exporting company, has driven it into a debt of $50 billion – equalling its turnover of one year.

This invasion, and Vladimir Putin’s entire buildup of the Russian military, would NOT have been possible absent the boon provided by high oil and gas prices (oil now stands at $105/barrel) and Russia’s stranglehold on their supplies to Europe. If that stranglehold is broken, and if these prices decline dramatically and soon, Putin will have no choice but to withdraw his troops, and his wannabe Evil Empire Redux will fall like a deck of cards.

Those who advocated the ridiculous policy of appeasement and unilateral disarmament that brought us into this mess in the first place now falsely claim that the only alternative to dialogue with Russia is war with that country. That is completely false.

No one wants war with Moscow. And since the Russian military is already more than strong enough to defeat the US military easily, it would be ill-advised.

But as stated above, Russia has one great glaring weakness – its economy – and as Sun Tzu wisely counseled, the right way to defeat your opponent is to strike his weaknesses, not his strengths.

Just as Ronald Reagan (who was vilified as a warmonger who would cause nuclear war) won the Cold War without firing a shot, the West, if it applies the right policies, can defeat Russia today, also without firing a shot, by pulling the economic lever. It absolutely can do so. The question is whether Western leaders will now have the intellectual courage to acknowledge the utter failure of their appeasement policy.

Apple’s Stock drops on underperforming iPhone Sales

Apple announced earnings today and it wasn’t what analysts had expected to hear – the tech giant missed expectations and gave lower future guidance.

Apple sold 51 million iPhones during the last quarter vs. analysts expectations of 55 million units.

The company also announced that it expects to bring in $42-44 billion in revenues. Analysts had expected more than $46 billion.

The downside announcements sent the stock down 5% and BGC downgraded the stock from “buy” to “hold.”

A larger story may be the lack of innovation coming from the technology darling. The next two iPhones slated for release seem to be nothing more than the current model with a larger screen.

Samsung and other players in the smartphone market can easily upsize or downsize screen sizes to match while also adding new features at pace that Apple is struggling to match.

Leading-edge products like the iPod, iTouch, iPad and iPhone were the steps Apple took to get where it is. The question on investors minds is – got anything left?

CNN spins Obama’s failures on the economy .. again

CNN.com’s Annalyn Kurtz starts out her article with a strong headline that plants the blame for a floundering economy squarely where it belongs, but then arranges factors and symptoms in an odd order to soften the blow.

The emboldened headlining paragraph reads:

Five years into his presidency, Barack Obama is still falling short of his number one goal: to fix the economy for the middle class.

Ok, first, why fix it just for the middle class? Shouldn’t we just want the economy to work so that everyone has an opportunity to make out of it what they can?

The article is titled “7 Setbacks for the middle class”, but actually there’s just one that’s the cause and most of the others are effects stemming from the primary failure – the economy isn’t producing jobs.

Annalyn lays out the 7 setbacks as thus:

  1. Workers are taking home their smallest slice of U.S. income on record
  2. Inequality has widened
  3. The job market still faces a gaping hole
  4. The poverty rate remains high
  5. Record number of Americans are on food stamps
  6. The manufacturing revival was a mirage
  7. Global trade isn’t helping much

The first two “setbacks” appear as though income inequality is a major factor in causing the economic hardships Americans have been facing under President Obama. Most informed Americans would have perhaps made a list looking more like this:

Prime Issue: The job market still faces a gaping hole

Effects of the Prime Issue:

  1. Workers are taking home their smallest slice of U.S. income on record
  2. Inequality has widened
  3. The poverty rate remains high
  4. Record number of Americans are on food stamps

Obama’s cash for clunkers, stimulus, stimulus two, extension of unemployment benefits, easing of welfare regulations and numerous other initiatives have done nothing to spur businesses into hiring – government programs rarely do. Add on Obamacare and the costs to business and consumers – there isn’t as much money left to spend in the economy so that retailers, manufacturers and service industry companies have the ability to hire.

With the, often last-minute, executive proclamation changes to regulations, any business that would think of growing is instead saving for a rainy day – it might just come tomorrow at the stroke of Obama’s pen.

Government intervention is holding back the recovery. Obamacare alone may stall it and the breakdown of the effects demonstrates the true relationship:

Workers taking home smallest slice of U.S. income on record:

Duh! With the labor participation rate at its lowest since Jimmy Carter, disability and food stamps at record levels – of course those living off the government aren’t getting a cut of the profits. That’s the difference between a paycheck and a handout.

Inequality has widened

Ok, what part of this “setback” doesn’t feel like a repetition of the last one? Yes, if fewer people are working, fewer people will be making as much money. Government handouts do not offer opportunity – just enslavement. The last five years have been a steady proof of that.

The poverty rate remains high

Of course is does. Not to sound like a broken record player but.. if you aren’t working, it is very hard to not be poor. No one gets rich on disability, welfare and food stamps.

Record number of Americans on food stamps

No way not to repeat myself here, so I won’t

You see, it comes down to a President and Congress who have no idea how to get out of the way and allow the economy to recover.

Economic Inequality is the mantra of the left and where it appears Annalyn was trying to take the reader, albeit unconvincingly. Measures such as raising the minimum wage, extending unemployment benefits to almost two years, relaxing welfare requirements are all doomed to failure and they are likely going to be the themes upon which many re-election campaigns are rested.

 

Shock: EPA Administrator Pushes Job-Crushing Climate Regs But Is Incapable Of Supporting President’s Warming Claims

In a hearing yesterday on climate regulation, Senator Sessions pressed EPA administrator Gina McCarthy to support the President’s statements on warming which are used to justify massive proposed administrative actions which would hurt millions of workers. McCarthy proved unable and unwilling to support the President’s claims despite being the central figure crafting and implementing EPA regulations.

Sessions: “Do I not have the right to ask the Director of EPA a simple question that is relevant to the dispute that is before us? Is the temperature around the globe increasing faster than was predicted, even 10 years ago [as the President claimed]?” 

McCarthy: “I can’t answer that question.” 

Sessions: “You are asking us to impose billions of dollars of cost on this economy and you won’t answer the simple question of whether [temperature around the globe is increasing faster than predicted] is an accurate statement or not?”

Latest Jobs Report ‘Very Bad’

Directly contradicting President Obama’s claim yesterday that the recovery is “very real”, the latest jobs numbers show an employment situation that even White House friendly MSNBC had to call “ugly” and “very bad.”

From a political perspective, there is a silver lining – the unemployment rate, which most news outlets report on, dropped to 6.7% from the previously reported 7%. Unfortunately, it was due almost entirely due to Americans giving up on finding a job and leaving the workforce.

91.8 million Americans are not in the workforce as of this month’s report – a new record. The labor participation rate, a measure of the percentage of the working age population that is working, dropped to 62.8%, a level not seen since Jimmy Carter was president.

5 times as many people left the workforce than the number of jobs the economy created.

As the current administration sees these numbers as a recovery, it should not be long at all before they take a victory lap – right about the time we have about 50% of all working age Americans employed and a 3% unemployment rate because everyone else has given up on even trying to find a job.

American Capitalism & The Illusion of Laissez Faire

To draw from an opening phrase, in the beginning, there was capitalism. More accurately, at the beginning of our Constitutional Republic, government was committed to limiting – drastically – it’s footprint in the new American marketplace. Americans were free from the tyranny of government interference leveled at the former colonists at the hand of King George III. Our Founders and Framers sought to secure the right of the individual not only to property, but to commerce in a form lightly touched by government. My, how far we have fallen from the Framer’s original intent.

The original intent of the Framers where commerce was concerned – and especially under the Articles of Confederation – was to leave the new American people to reap the benefits of their crafts and labors. The Framers embraced a laissez faire system of capitalism. Laissez faire capitalism is defined as:

“…a doctrine opposing governmental interference in economic affairs beyond the minimum necessary for the maintenance of peace and property rights.”

A system of government’s only responsibility in a laissez faire capitalist system, where commerce was concerned and if adhering to the original intent of the Framers, was:

“…to protect the rights of the individual, by banning the initiation of force, thus making all relations between men peaceful, i.e., free from the threat of violence and fraud…

“…a system of checks and balances so ordered to protect the rights of the individual, from criminals and most importantly from the democratically elected voices who claim to speak for the ‘public good.’”

Today’s American “free market system” is actually anything but a laissez faire capitalist system; a free system.

Starting a small business today requires that the aspiring entrepreneur incur significant start-up costs including fees, costly regulatory acquiescence, licensure requirements, taxes, tariffs, diversity quota hiring and other associated costs, taxes, actions and/or fees. Add to that the impossible task of acquiring necessary to-market development capital from a financial institution – many of which were afforded lifesaving financial infusions of taxpayer dollars, courtesy of crony capitalists in Washington, DC – and you have a formula for a stagnant economy and high unemployment for the “producers,” and the selective enrichment of the connected, the elite and the “chosen few.”

This was not the case so long ago. And as little as 30 years ago, starting a small business meant reaping the rewards of ingenuity and hard work. Someone with a dream; someone with a “good idea,” was able to acquire capital to launch small business initiatives based on that tangible idea; based on a well-crafted business plan and model. Sadly, today, no one “invests in ideas” anymore. Financial institutions and capable venture capitalists balk at the “good idea”; recoil from the uncertainty of start-up entrepreneurship because of the non-guarantee of return on investment, even as many of them have been deemed “too big to fail” when they make bad business decisions of their own, only to receive government-funded (read: taxpayer-funded) bailouts. This all happening while the “good idea” start-up concepts wither on the vine for lack of start-up capital.

Additionally, many a creative entrepreneur is neutered – or hamstrung – by the fact that the “powers that be” have declared they did not jump through the traditional “educational hoops”; did not attain the necessary piece of paper and the required student loan debt to be considered “competent” or “intelligent” enough to conceive of the “next big thing.” Of course, this certainly must come as a surprise to Bill Gates, or to the late Steve Jobs, two pioneers of the computer age who dropped out of college. So, too, must is be shocking news to the many “gangsta” rap moguls who possess a depth of language proficiency usually reserved for those with a single or low double-digit intelligence quotient, and most of whom know the assembly of automatic weaponry better than algebraic theory.

And while the successful navigation of the “educational hoops” does not guarantee entrée into the realm of the financially anointed, sometimes the connections and friendships acquired at many upper-echelon secondary education establishments can serve to circumvent the ties that bind “producer Americans” to the grind of the average. Yes, I am talking about elitist crony capitalism.

Case in point: Toni Townes-Whitley.

According to TheDailyCaller.com:

“Toni Townes-Whitley, Princeton class of ’85, is senior vice president at CGI Federal, which earned the no-bid contract to build the $678 million [failed] Obamacare enrollment website at Healthcare.gov. CGI Federal is the US arm of a Canadian company.

“Townes-Whitley and her Princeton classmate Michelle Obama are both members of the Association of Black Princeton Alumni.”

Coincidentally, George Schindler, the president of CGI Federal’s Canadian parent CGI Group, became an Obama 2012 campaign donor after his company gained the Obamacare website contract. What a coincidence…

What does all of this have to do with laissez faire capitalism? Well, actually, nothing. It has nothing to do with laissez faire capitalism. And that’s the point.

Considering that our economic system has turned into a fiscal bordello of short-cuts for the Progressive chosen few, bailouts for the “too big to fail” financial institutions, and a playground for the crony capitalists, is it any wonder the financial markets have ceased reflecting the health of the American economy? How are investors supposed to know when the next major economic disaster is approaching when risky investments and questionable financial schemes are always rewarded in their failures and losses with government-backed (read: taxpayer-funded) bailouts? For the “chosen ones,” where is the “risk”?

The original intent of the Founders and Framers was to have an “American capitalism”; a system of commerce and investment based on achievement, investment, hard work, production and, yes, failure. The American system of capitalism was designed to leave the evolution of society and the decisions about the “common good” to the people. Today’s “anything but free market system” is a disingenuous scheme establishing pre-determined winners and losers; a manipulation of the laissez faire capitalist purity that promotes equality in outcome over an equality of opportunity: economic and social justice.

In an economic system enslaved by the Progressive ideology, economic and social justice is of a paramount importance, trumping the small business, the innovator, the entrepreneur and the producer; trumping and extinguishing opportunity for all, opportunity guaranteed in the United States Constitution.

An economic system enslaved by the Progressive ideology dictates who will win and who will lose; who will acquire wealth and who will live just above poverty, all according to an oligarchical elites’ idea of what is fair, what is not and who is worthy.

Under a Progressive economic system, opportunity is dead and the American Dream, but for those chosen by the Progressive masters, swings from a rope off a branch of a socially engineered (read: Socialist) tree, long-standing on the Progressive plantation.

“Not houses finely roofed or the stones of walls well builded, nay nor canals and dockyards make the city, but men able to use their opportunity.” – Alcaeus

Rebuttal of William Hartung’s blatant lies about the threat environment

Display of might

The leftist “BreakingDefense” website has recently (on Dec. 12th) published yet another utterly ridiculous leftist screed, this time by ignorant anti-defense hack William Hartung from the far-left “New America Foundation”, an organization that seeks to turn America into a socialist, militarily weak country. In that garbage screed, Hartung falsely claims that:

1) The world is much safer now than during the Cold War and there is no significant threat to America’s or her allies’ security;

2) US military superiority is uncontested and there’s no one able to contest it;

3) The US spends too much on defense and should cut it by $100 bn per year, below Cold War average levels;

4) The only threats to US security on the horizon are the politically-correct threats of man-made climate change, disease, hunger, and nuclear-armed terrorists, and potential “miscalculations” in the current territorial disputes in East Asia. Hartung falsely claims none of America’s current or future security challenges can be solved through the “traditional means of military power”;

5) The Ryan-Murray budget deal would give an additional $20 bn to the DOD every year and would effectively increase defense spending.

All of Hartung’s claims are patently false. All of them.

1) Despite his pious denials, the world is far, far more dangerous than at any point during the Cold War except the Cuban Missile Crisis over 50 years ago. It is, in fact, more dangerous than at any point since WW2, again excluding only the CMC. During the CW, the US had to deter only one hostile superpower. Today, it has to deter and keep in check TWO hostile superpowers with large nuclear arsenals – Russia and China – as well as a nuclear-armed and belligerent North Korea, soon to be joined by a nuclear-armed Iran. It also has to fight terrorist organizations, such as AQ and Hezbollah, around the world. To cut US defense spending even further (after all the previous, pre-sequestration rounds of defense cuts implemented by the Obama admin) would be suicidal. No, the US is not spending too much on defense; if anything, it is spending too little. The world is decidedly NOT safer now than during the Cold War; for all of the above reasons, it is far MORE dangerous.

2) US military superiority is mostly a thing of the past already. Russia and China both wield large, modern, and growing nuclear arsenals as well as large, modern conventional militaries. In most categories of weapons, they’ve already matched or bested the US and are now working on closing the remaining few gaps. Their Flanker fighters are superior to everything the US flies except the F-22 and upgraded F-15C/Ds. Their PAKFA, J-20, and J-31 stealth fighters will best everything on the planet except the F-22 (whose capability they will nonetheless approach). Their Sovremenny and Type 052 DDGs are better than the USN’s DDGs, their submarines are quieter than the USN’s (who also sucks at ASW), and the PLAN already has far more attack subs than the USN does. In a few years, the PLAN will have more submarines, and more ships, in total than the USN. They both also have IRBMs, a class of weapons the US does not have, and China also has a huge arsenal of GLCMs. It is now also developing a stealthy, intercontinental bomber capable of reaching the CONUS.

But most troublingly, these countries (and on a lesser scale, rogue states like the DPRK and Iran) have fielded large, multi-layered networks of anti-access/area-denial weapons and capabilities that can shutter the US military out of entire war theaters completely, by destroying US land bases, USN surface ships, US satellites, and crippling US cyber networks as well as denying access to their airspace to all but the most stealthy a/c (F-22s and B-2s, plus the future LRSB/NGB). Their air defense systems can shoot any nonstealthy aircraft from hundreds of kilometers away. This means the US will have to acquire a wholly new series of long-range strike platforms that can access even the most heavily-defended countries, hit their assets, and operate at great distances, as well as disperse, harden, and fortify its current land bases and upgrade its air and missile defenses. This cannot be done on the cheap – it will require significant and sustained investments.

So Hartung’s claim that there’s no threat to US military supremacy is also a blatant lie – like the rest of his screed.

3) How much money the US has spent on defense in decades past is completely irrelevant to how much money should it be spending on defense right now. The only way to determine the right amount is to ask: “What exact capabilities (and thus weapons) do we need, at what level of sophistication, and at what quantity, and how much will it cost to recruit, house, feed, equip, train, maintain, care for, and compensate such a military?” Only this way can the right amount of defense spending be determined.

Raw figures and exclamations, like “oh my gosh, we’re spending $480 bn to $500 bn per year on defense, can’t we provide for our security with that amount?” and “oh my gosh, we’re spending more than during the Cold War on defense!” are utterly irrelevant and childish. Not to mention that the dollar is worth far, far less today than during the Cold War, and that as a share of the federal budget and of GDP, the US now spends LESS on defense than at any point since FY1940.

Hartung, whose goal is to totally gut America’s defense, OTOH, wants to arbitrarily cut US defense spending deeply so that it will be woefully inadequate.

4) Despite Hartung’s blatant lies that the world’s current security threats cannot be solved by military means, nothing could be further from the truth. Today, the biggest threats to America’s and its allies’ security are: an ascendant and aggressive China, a resurgent and aggressive Russia, a nuclear-armed NK preying on its southern neighbor and the US itself, an Iran speedily developing nuclear weapons and BMs, and terrorist groups of global reach like Hezbollah and AQ. These threats cannot be defeated by ANYTHING other than military means – because the ONLY thing these potential aggressors understand and respect is military strength. It’s the only thing that can deter and if necessary (Hezbollah, AQ) defeat them.

5) Contrary to Hartung’s blatant lies, the Ryan-Murray budget deal would not add a penny to the defense budget. It would only slightly reduce the amount of sequestration-required budget cuts the DOD would have to make in FY2014 and FY2015: by roughly $20 bn this FY and $9 bn the next, out of over $50 bn in cuts mandated by the sequester for every FY going forward thru FY2022. After FY2015, the sequester would return in full force.

Even before sequestration, the DOD had already cut almost a TRILLION dollars out of its budget: in over $330 bn in cuts resulting from the killing of over 50 crucial weapon programs by Sec. Gates, $178 bn in his later “efficiencies”, and $487 bn under the first tranche of BCA-mandated (pre-sequester) budget cuts. Sequestration is only the newest series of defense budget cuts being implemented by the Obama administration, which targeted defense for deep cuts as soon as it took office. Any claim that Ryan and Murray want to add any amount of money to the defense budget is a flat-out lie.

6) The Stimson Center’s proposals are useless, because they would “achieve” $25 bn in “savings” only by deeply cutting the military’s MUSCLE – America’s military CAPABILITIES, not the fat. Specifically, the Army would see even deeper cuts than those proposed by Obama, and the Navy’s planned SSBN replacement fleet would get cut from the barely-adequate planned number of 12 to just 10 boats. This is the defense policy of a madhouse.

7) Hartung shows his true colors when he calls on Congress not to spare the DOD at all from the sequester… but does not object to Congress reducing the scheduled sequester cuts to nondefense (domestic) discretionary programs, the vast majority of which are unconstitutional. This proves, once again, that Hartung’s goal is NOT to save taxpayers money, but to gut America’s defense.

And for that, he should be damnated forever as the traitor he is.

Shame on Hartung for lying so blatantly, but above all, shame on BD and its editors, Colin Clark and Sydney Freedberg, for publishing his litany of blatant lies and thus giving him yet another avenue to lie to the public, as if he didn’t have enough. Shame on you, Messrs. Clark and Freedberg!

« Older Entries Recent Entries »